New book chronicles the rise of laissez faire capitalism

The Great Persuasion

Ideas have consequences, Richard M. Weaver famously argued in 1948. It is now a slogan of the Heritage Foundation, which, in true American style, adds that "those ideas must be promoted aggressively."

And so they are and so they do, and few ideas have been more far-reaching and disastrous than the notion that markets should be unregulated and governments should do as little as possible to ameliorate capitalism's iniquities.

It is an idea with roots in the 16th century. But never has it been so fully and toxically distilled as now-even despite eight decades of evidence showing its folly.

To understand why laissez faire has been ascendant-that is, to fully appreciate what's behind this week's nonsensical panic over the federal government's looming "sequester" cuts and the idiocy of the law that created it; the inanity that propels most of the Republicans in Congress to pass laws that require government spending and then, months later, to refuse (on principle!) to allow that spending by raising the so-called "debt ceiling"-it is necessary to know about the Mont Pelerin Society.

Both fortunately and unfortunately, Angus Burgin's The Great Persuasion (Harvard) has hit shelves recently with a full and sometimes ponderously detailed account of the main players, important dates, minor players, and trivial spats of this think tank of Western, neoliberal thought. The assistant professor of history at Johns Hopkins University does an admirable job of unpacking more than 80 years of often dense (in several senses) writing by the likes of Ludwig von Mises, Fredrich Hayek and Milton Friedman. Employing the very sterilest journalistic and academic conventions, Burgin lays out the facts in an objective, nonjudgmental manner. He shows how a small group of tentative "free market" partisans from the London School of Economics began holding annual meetings in the 1930s to discuss how society might resist the march toward that devil socialism; they soon attracted the sponsorship of wealthy industrialist types, and-with the publication of Hayek's "The Road to Serfdom" in Reader's Digest condensed form in 1945-sparked for its core precepts a half-century of increasing popularity and decreasing subtlety and academic rigor.

The ascendence of Milton Friedman and the "Chicago School" dominates the last half of the book, and would have done well as a book on its own. Friedman's descent from academic subtlety to shilldom-and his concomitant ascent to fame and fortune-is relatively well-known. But Burgin fixes the pivot point exactly. It was in 1946. A group called the Foundation for Economic Education (FEE) commissioned Friedman and George Stigler to write a takedown on rent control-then, as now, a major bugbear to the owning class. For $650, this they did.

But in the draft of what would become "Roofs or Ceilings?," Friedman and Stigler wrote a paragraph in favor of income equality, which their FEE patrons found "repugnant." In a compromise, the authors allowed an "editor's footnote" to appear, undercutting the idea that inequality was somehow bad.

In subsequent decades, the model and system of well-funded rightist think tanks, endowed chairs, and succulent consulting gigs has transformed the field of economics-and the economy itself. Those who pay the piper are increasingly those who see "communists" behind any business regulation, regardless of evidence. And their house economists-Friedman, then Alan "I found a flaw" Greenspan, and now men like Columbia's Glenn Hubbard-carry the fetid water for any high-enough bidder. Congressmen (and women) cite their Ph.D.s while filibustering anything that doesn't appear in the Atlas Shrugged index of policy prescriptions.

And as I write this, 300,000 people face layoffs for no good reason. As Burgin writes near his conclusion, "capitalism may be in crisis, but the horizon of alternatives has narrowed."